What investors want in place when they invest in your startup

Village Capital developed and published their VIRAL Pathway (Venture Investment-Readiness and Awareness Levels) that is a very good aid in helping align entrepreneurs and investors on a venture’s state of readiness for investment. Assuming that a startup aligns with the point at which an investor wants to invest, and meets its investment criteria, investors will then look for the following when they consider making an investment:

Action

Your startup has made progress working on creating and delivering your product and service.

• Investors generally dislike pitches where all of the inputs are “theoretical” and it is evident that the entrepreneur is waiting for investment money to get started.
• Investors, themselves risk takers, like to meet entrepreneurs who have forged ahead and launched the creation of their business while seeking investment on a parallel path.

A strong execution plan

• List the milestones critical to the success of your new startup, with the specific goals, timing and funding amounts required to achieve those milestones.
• Include a brief list of major tasks you have completed or need to complete to launch your organization and accept outside investment.

Go-to-Market Strategy

• You can clearly articulate total addressable market and your plan to capture market share in a repeatable efficient manner
• Your value proposition has a meaningful quantifiable impact on your target customer’s business and is clearly differentiated from alternatives

Key management team members

• You have attracted a strong management team, or
• You have put the nucleus of that management team in place and plan to add additional members as capital is raised.

A viable business model for your startup

• You’ve figured out a way to make money from your idea. Remember, the best technology, product or service goes nowhere without a sustainable business model.

A financial model and financing roadmap

• You have a detailed list of assumptions you’re making about the business.
• You have determined the amount of capital you require, and the timing of these requirements.
• You have forecast the financial results you expect to generate.

Clean and clear intellectual property position

• If applicable, you have taken the necessary steps to protect ownership and to enable access to any intellectual property that is critical to the operation and success of the business.

With these resources and information about the business in hand, you are now ready to approach prospective investors about your new business opportunity.

Thinking of raising money? We’ve created a free online course to help you get investment-ready. Check out Introduction to Investment Readiness and learn useful tips, tactics and strategies to prepare for your seed fundraising round.

References

Kawasaki, G. (2004). The Art of the Start: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything. Toronto: Penguin Canada.